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Companies Plan Bonuses Despite Economy

While more companies are faring better than a year ago, most remain in a relatively fragile state and appear unwilling to break from the cost-containment measures that saw them through the worst recession in decades. The latest evidence of this can be seen in a new survey showing that the number of employers giving year-end bonuses is virtually unchanged from a year ago. In the survey of approximately 100 human resources professionals, 63 percent said their companies were giving year-end bonuses this year. That is about the same level as a year ago, when 64 percent were expecting bonuses to be awarded. The non-scientific survey was conducted by global outplacement consultancy Challenger, Gray & Christmas, Inc.

However, as a testament to just how precarious the recovery is for many companies, 16 percent of survey respondents said their companies were planning to give smaller bonuses this year. Only four percent said the same in 2009.

Nearly one in three (30 percent) said bonuses will be about the same as last year, while only eight percent said bonuses will increase. Nine percent said their companies were reinstating bonuses after one or more years of not awarding any.

Even as some companies slowly begin to feel the effects of the recovery, others are still struggling. Twelve percent of respondents said their companies gave out year-end bonuses last year, but are not planning to do so this year. That is a slight improvement from 2009, when 16 percent of companies canceled year-end bonuses.

“According to economists, the recovery began in July 2009. But, for many companies, the recovery simply means they are no longer hemorrhaging money. They are definitely more stable; a fact that is evidenced by the significant decline in monthly job-cut announcements. However, most employers are still not at a point where profits are taking off. As a result, we are not seeing much hiring or other expansion efforts,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

“In this environment, it is not very surprising that bonus activity was stagnant. The fact that it remained above 60 percent indicates how bonuses have become part of employee-retention programs. While companies are not quite ready to ramp up hiring, they are definitely making efforts to hold onto the employees they have,” said Challenger.

While the human resource executives surveyed did not provide details on the amount of bonus checks, John Challenger said some companies may choose to be creative when it comes to year-end rewards.

A San Francisco Chronicle blog reported that Swedish retailer IKEA delivered bicycles to all of its 12,400 American employees as a year-end bonus. The company’s press release stated, “This is our way of saying ‘thanks IKEA co-workers for being strongly committed to working together.’ We hope this bike will be taken in the spirit of the season while supporting a healthy lifestyle and everyday sustainable transport.”

“In some respects, it truly is the thought that counts. Employees want to be recognized for their contribution to the company. It doesn’t have to be a Wall Street sized bonus check. Many workers would be happy with a $100 gift certificate to a local restaurant or store. Many would probably be happy with a couple of extra days of paid vacation at the end of the year. Many are simply happy to have a job in this economy,” said Challenger.

“Of course, those who are just happy to have a job are usually the first ones seeking greener pastures at the first sign of improvement. Companies understand this and it is why nearly two-thirds of them are finding a way to give bonuses this year,” he concluded.

CHALLENGER HOLIDAY BONUS SURVEY RESULTS

Yes 63%

Yes – Bonuses will be about the same as last year. 30% Yes-We plan to decrease them. 16% Yes-Reinstating bonuses after one or more years of no bonus. 9% Yes-We plan to increase them. 8%

No 37%

No-We awarded bonuses last year, but not this year. 12% No-We never give bonuses. 25%